China's Forex Reserves Top $1.33 Trillion

A 41.6% increase

China's foreign exchange reserves, already the world's largest, surpassed $1.33 trillion at the end of June, the central bank said July 11.The reserves were up 41.6% from 12 months earlier, the People's Bank of China said.

A total of $266.3 billion have been added to the reserves total in the first half of 2007, $144 billion more than a year ago, the bank said.

The announcement came one day after China said that its trade surplus for June had soared 85.5% to hit a record monthly high of $26.91 billion.

China's soaring trade surplus is one of the main factors contributing to the bulging forex reserves. China's top economic planning agency said in May that the trade surplus was likely to hit $250-$300 billion in 2007, up from a record $177.5 billion last year and a massive increase from $31.98 billion in 2004.

A large proportion of China's forex reserves are believed to be tied up in relatively low-yield U.S. Treasury bonds.

As part of its efforts to maximize returns, the government is preparing to set up a state-controlled investment firm, which will reportedly manage a fifth of the forex reserves.

Copyright Agence France-Presse, 2007

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